The prime location of MREIT buildings make it attractive to tenants as these are surrounded by various township components, like parks and residential developments.

With four real estate investment trusts (REITs) already listed at the Philippine Stock Exchange, catching the interest of pandemic-weary equities investors becomes a much bigger challenge. 

However, the country’s top township developer Megaworld Corporation is unfazed and meets this challenge head on by launching its REIT vehicle, MREIT Inc.

“We have included our 10 most prime office assets hosting only high-quality BPO tenants from three vibrant, well-known locations—Eastwood City, McKinley Hill, and Iloilo Business Park. If you invest in MREIT, then you automatically become a part-owner of all the assets located in these townships, which command the most competitive rentals in the entire country,” said Megaworld Chief Strategy Officer and MREIT President & CEO, Kevin L. Tan.  

The MREIT portfolio of assets include 1800 Eastwood Avenue, 1880 Eastwood Avenue, E-Commerce Plaza, One World Square, Two World Square, Three World Square, 8/10 Upper McKinley, 18/20 Upper McKinley, One Techno Place, Richmonde Tower, and Richmonde Hotel Iloilo.

Tan said MREIT takes pride in the high quality and prime location of its assets, the quality of its tenants and, more importantly, its bankable sponsor, which gives it a huge growth potential.

Prime Locations

MREIT Assets inside McKinley Hill are the only REIT developments located in Fort Bonifacio, which currently commands the highest rental fees among the country’s top financial districts.

Well-located real estate assets have historically been proven to perform better during good times, while also being more resilient during bad times.

This is because tenants will always prefer strategic locations with good infrastructure, where access to transportation, proximity to amenities, zero flooding incidences, and utmost safety and security are all present.

“All MREIT assets are part of our townships that are touted as the most sought-after destinations of BPO companies today. This makes the MREIT portfolio as the only REIT that is truly a ‘township’ in nature,” said Tan.

A great majority of MREIT’s assets, amounting to 224,430 square meters of gross leasable area (GLA), are located within Metro Manila, which continues to be the center of the Philippine economy since 70 percent of the Philippines gross domestic product (GDP) is focused in this area. The BPO sector is also growing the most in Metro Manila. 

“Eight out of our 10 MREIT assets are located here in Metro Manila, and five of them are in Fort Bonifacio—an area that commands the highest office rent in the country. 

All these MREIT properties are either PEZA-registered or located in PEZA-registered zones, which entitles tenants to premium incentives. 

Topnotch Tenants

Megaworld’s live-work-play township concept, which the company pioneered in Eastwood City, continues to highlight its relevance for BPO employees particularly during the pandemic.

Tan said that, aside from their prime location, MREIT assets are all premium Grade A buildings that attract high-quality tenants, which tend to be more ‘sticky’ and pay higher rents.

“The MREIT buildings mainly host reputable multinational companies and leading BPO firms, including well-renowned companies such as IBM, Google, and Refinitiv, which have all been with Megaworld for over 15 years. That milestone alone is a true testament to the strength of the company’s relationship with key tenants and the quality of MREIT’s assets,” Tan noted. 

Business process outsourcing (BPO) firms and multinational companies tend to be less volatile and stay in a property longer. This reduces the uncertainty to investors, while also minimizing the element of surprise and providing steady returns. 

Meanwhile, he pointed out that, “There are zero POGOs (offshore gaming operators) in MREIT’s assets because it is simply very risky. Even a minute percentage of POGO can greatly influence the outcome of any REIT. Whenever they pull out, there’s a significant amount of downtime involved, which affects the rental revenues of any building.”

High Occupancy Rates

In spite of the community quarantine imposed by the government due to the coronavirus pandemic, MREIT said its properties enjoy pre-COVID-19 occupancy levels due largely to the sustained operations of the BPO office tenants. The consistently high occupancy rates translate to stable rental revenues. 

The firm said its strategically located assets in Megaworld townships both in Metro Manila (Eastwood City and McKinley Hill) and in the province (Iloilo Business Park) allows MREIT buildings to maintain high levels of occupancy.

“In addition, we believe that we enjoy greater credibility with our tenants as a result of the reputation, scale of operations, and the amenities and infrastructure that Megaworld has historically provided. Generally, this allows our assets to be viewed as premium properties, which in turn appeals more to tenants and result in high occupancy rates,” said Tan. 

He stressed that, “All of these tell you how we’ve put a huge emphasis on offering only our best assets on MREIT to make it an advantageous REIT that is hard to match.”

Strong Sponsor with Large Pipeline for Growth

To maximize long-term upside, it is important for a REIT to have a sponsor with a significant pipeline of assets that it can steadily inject into the REIT. 

MREIT’s sponsor, Megaworld Corporation, currently stands as the largest office landlord and developer in the Philippines, and also one of the biggest in Southeast Asia with a portfolio of about 1.4 million square meters of GLA.

Tan said “MREIT’s current portfolio is composed of just 16 percent of Megaworld’s total developed assets, which means it has a significant runway for growth down the line. The remaining office GLA, together with Megaworld’s robust pipeline of future developments, will ensure MREIT a significant supply of a high-quality captive pipeline of inorganic growth.”  

Reinvestment Plan

Megaworld intends to use the P27 billion in fresh capital to complete 21 new office and commercial projects across 11 of its township developments in the country as it continues to help build the country back from the impact of the pandemic.

“We will be reinvesting this on big-ticket projects as we look forward to full recovery in our economy and help bring consumer confidence back to normalcy,” said Tan.

He revealed that, “All of these new developments will spruce up our new townships, and at the same time, further expand our rental income portfolio. More than 70 percent of these new projects are office developments.”


Source: Manila Bulletin (https://mb.com.ph/2021/09/10/what-makes-mreit-an-attractive-option-for-investors/?utm_source=rss&utm_medium=rss&utm_campaign=what-makes-mreit-an-attractive-option-for-investors)